Monday, November 28, 2016

US Economic Week in Review

On Monday, the Chicago Fed released its latest National Activity Index. This statistic collates 85 indicators from four general economic statistical categories. Any reading below .7 indicates a recession is a higher probability while any reading below 0 indicates the economy is growing below potential. According to the indicator’s three-month moving average, the economy has been expanding below potential for the most of the last 5 years:

Housing news was positive. Existing home sales increased 2% M/M and 5.9% Y/Y. Although new home sales decreased 1.9% M/M they increased a very strong 17.9% Y/Y. The 5-year chart places new home sales figures into a longer-term perspective:

Starting in July 2015, new home sales began a year-long increase. Recent declines probably a cooling off from an accelerating pace. Going forward, expect both of these numbers to decrease as the impact of higher interest rates flows through the economy.

Durable goods orders rose for the 4th consecutive month, this time by 4.8%; the figure rose 1% ex-transportation. However, the overall trend is still weak:

The total orders line (in red) has moved sideways 2013 while the ex-transport number has decreased slightly over the last 2 years.

Economic conclusion: this week’s news was positive. Housing continues to be a bright spot, although the recent increase in rates may slow their recent moves. Durable goods numbers were also positive, although we don’t have enough data to determine if a new trend is starting. Finally, the CFNAI is still within expansionary parameters, although the 3 month moving average is still showing a below average expansion.